What is Accident, Sickness and Unemployment (ASU) Insurance?

Both Payment Protection Insurance and Mortgage Payment Protection Insurance are forms of ASU. Accident, Sickness and Unemployment Insurance is usually taken when someone is concerned about how they would meet their obligations were they to be incapacitated by accident, sickness or unemployment. Not surprisingly then, the majority of people taking on such a policy have debts or other liabilities, the costs of which need to be met, no matter what.

As with all insurance, which is effectively a hedge against risk, factors such as health, age, profession, pastimes and job security will have an effect on the premiums you may need to pay. The other variable is, of course, the size of the liability being insured and the time period for which you need the cover.

Mortgage Payment Protection (MPP) policies will normally only pay out for a maximum of a year, so if you do have sufficient savings in place to tide your over for this length of time, then you may not require cover. In any event, it is worth checking with your employer what you are likely to be entitled to in the event that you are made redundant or taken ill. It is also worth noting that although statutory sick pay doesn’t usually affect short term income protection, anything you receive over & above this (from your employer for example) can affect the benefit payable under the policy. If this is the case, you may be better off going for accident and sickness MPPI cover only. State benefits don’t usually affect this unless they take you over the maximum claim limits, but this is worth checking before taking out a policy.

As a general rule, mortgage protection policies will start paying out either 31 days or 60 days after you are unable to work. However, many policies are ‘back to day one’ plans. This means that the benefit you receive is backdated to the date you were first out of work.

Monthly payments are capped, so if you have a very large mortgage, you will need to think about how you will cover any surplus.Remember that policies will not usually allow claims related to unemployment within the first three or six months so make sure you have savings in place for this period.

Taking an ASU policy can be a prudent way to manage risk. For more information or to speak to an ASU adviser contact us on 01628 507477.

The Financial Ombudsman Service is an agency for arbitrating on unresolved complaints between regulated firms and their clients. More detail can be found on their website: www.financial-ombudsman.org.uk